Most people don’t manage a business, however nearly everyone acts as a seller in some context. Give some examples of how you operate as a seller in your everyday life.
Workers act as sellers of their time in the labor market in return for some wage. Let’s discover your individual supply curve for labor. For each hourly wage rate provided in the accompanying table, determine how many hours you would be willing to work each week. Then, plot your individual supply curve for labor. Are there wage rates at which you would not be willing to work at all? Use the concept of opportunity cost to briefly explain your reasoning.
| Hourly wage rate | Hours willing to work each week |
|---|---|
| $10 | |
| $20 | |
| $30 | |
| $40 |
Determine which of the four core principles should be applied in the following decisions and explain how to apply them.
Your boss has offered to pay you for up to five hours of overtime today. You’ve already been working for 10 hours and are deciding if you want to stay another hour.
A local UPS manager is trying to decide if she should pay for a new truck and driver to supply a larger quantity of package deliveries each day.
What is wrong with the following statement?
The market supply for natural gas is the sum of all prices that natural gas producers are willing and able to sell at for every quantity.
Maria is an industrial engineer at a Nissan plant. Using the interdependence principle, explain why and how she should change production plans if one of her engine suppliers cut the price they charge Nissan by 50%. What about if workers unionize and demand a 12% across the board pay raise?
What impact does the decision to enroll in college have on your individual supply curve for labor while you are in college? Does it cause a shift in the supply curve or a movement along the supply curve? Draw a graph to illustrate your decision.
You have landed a job as an analyst working for a company that is selling a new environmentally friendly single cup coffee maker. Using the accompanying supply plan, draw your company’s individual supply curve. Does your company’s supply curve follow the law of supply?
| Price | Quantity supplied (thousands) |
|---|---|
| $100 | 0 |
| $150 | 500 |
| $200 | 1,000 |
| $250 | 1,500 |
| $300 | 2,000 |
| $350 | 2,500 |
| $400 | 3,000 |
Tomas is the general manager for a local automated car wash. The market he operates is perfectly competitive: Every car wash in the area is charging $7 for a car wash, which is also the marginal cost per wash. What will happen to Tomas’ profits if he changes his price to $8. Why? What about a price of $5? What is his profit-maximizing price?
Edith is the owner and manager of a small coffee shop that employs three workers who use the shop’s one coffee machine to make and serve coffee to paying customers. Business has begun to pick up; lines are getting longer every day in her shop. On a busy morning, she sees her employees scrambling to take orders, get cups, fill coffee from the coffee machine, add cream and sugar, and serve customers in a timely manner. She figures if she hires three more employees she’ll be able to sell twice as much coffee. Do you think she’s likely to be right? Why or why not?
Boeing is a producer of aircraft. Determine whether each of the following are fixed costs or variable costs for Boeing. Then, determine if they should be included in the marginal cost of producing an additional plane.
The manufacturing plant used to produce the aircraft
The labor used to produce the aircraft
The seats that are installed in each aircraft
Miker, a manufacturer of generic medications, is deciding how much to charge retailers for their generic acetaminophen. The marginal cost for each bottle is provided in the accompanying table. If the price of a bottle is $7.75, how many thousand bottles would Miker produce each day? What about if the price is $9.00 per bottle? Use the Rational Rule for Sellers in Competitive Markets to help explain why the values are different. Finally, draw Miker’s individual supply curve.
| Quantity of acetaminophen (thousand bottles) | Marginal cost (per bottle) |
|---|---|
| 1 | $6.00 |
| 2 | $7.00 |
| 3 | $7.75 |
| 4 | $8.25 |
| 5 | $9.00 |
| 6 | $9.50 |
Suppose there are four gas stations in your town. The quantity of gas that each one is willing to supply per week at various prices is provided in the accompanying table. Determine the quantity supplied for the entire market at each price, and graph the market supply curve. Illustrate on your graph what happens to the supply curve when the price rises from $3 to $5.
| Price per gallon | Station A | Station B | Station C | Station D |
|---|---|---|---|---|
| $5 | 8,000 | 5,000 | 6,000 | 9,000 |
| $4 | 6,000 | 4,000 | 5,000 | 5,000 |
| $3 | 4,000 | 3,000 | 4,000 | 3,000 |
| $2 | 2,000 | 2,000 | 2,000 | 1,000 |
| $1 | 0 | 1,000 | 1,000 | 0 |
You have recently been hired by Delta Airlines to work in its strategy division. For each of the following, illustrate how Delta’s supply curve for airline flights will be affected by drawing a graph showing any changes.
The price of jet fuel falls.
Innovative new software allows Delta to more efficiently allocate its aircraft.
Delta has just signed a new labor contract that raises the hourly wage it pays to its employees.
When Dell adopted a “lean production” process—a management tool that reduces inefficiencies without reducing production—it became one of the world’s largest computer manufacturers. What impact did the adoption of lean production techniques have on the Dell’s individual supply curve for computers? Use a graph to help illustrate your answer.
Briefly explain whether each of the following represents a shift in supply or a change in quantity supplied. Use a graph to illustrate your answer.
An increase in the use of corn in the production of ethanol has raised the cost of corn to farmers who use it as livestock feed.
Speculators in world steel markets push the price of steel up, leading American steel companies to expand production.